Carriers question United alliance

WASHINGTON--A group of small carriers is raising questions about a proposed marketing agreement between United Airlines and Virginia-based U.S. Airways Group Inc.

In a filing Tuesday with the Department of Transportation (DOT), the Air Carrier Assn. of America (ACAA) said the alliance would reduce competition, noting that United and U.S. Airways are the two largest carriers in the Washington, D.C., area.

"Almost everybody is going to be impacted" by the two carriers' code-sharing agreement, said Edward Faberman, executive director of the group of smaller carriers, including Frontier Airlines, AirTran Airways Corp., Spirit Air Lines, Sun Country Airlines and Vanguard Airlines, which filed for bankruptcy Monday.

ACAA asked the government to halt its review of the United-U.S. Airways alliance until it creates an open process for full disclosure of all relevant details of the pact, including any communications with government agencies.

That process also would allow other airlines to file public comments on the agreement. The U.S. Airways-United agreement would allow each carrier to book flights on the other using its own ticketing code, boosting revenues when connecting flights are required.

Such arrangements are common between major carriers and regional airlines or international airlines. But Mr. Faberman noted that a previously attempted merger between United and U.S. Airways would have spun off United's Washington-area operations because of the competitive impact of combining the capital's two dominant carriers. That merger was ultimately called off after the Department of Justice (DOJ) raised concerns about the impact on competition.

"This may be a case where DOT should look to DOJ for advice," said Mr. Faberman.

The industry group noted that U.S. Airways obtained conditional approval of a $900 million federal loan guarantee earlier this month from the Air Transportation Stabilization Board (ATSB). In return, the ATSB would get a security interest in some of U.S. Airways' gates and operating rights at crowded airports.

Based on statements by U.S. Airways officials, ACAA said it appears that the tentative approval of the loan guarantee stipulated that U.S. Airways would enter into a code-sharing agreement with a major carrier. U.S. Airways announced last week that it had reached an agreement with United, a unit of Elk Grove Township-based UAL Corp.

ACAA has not decided whether to oppose the U.S. Airways-United deal. "We certainly want to look at the details," said Mr. Faberman. "I'm not sure we can form a position without knowing the government's involvement."

"We hope DOT will give it a prompt review," said a U.S. Airways spokesman. An ATSB spokeswoman declined comment and a call to a United spokesman was not immediately returned.